Music streaming, promotion, and the next song on your radio station

Payola was a big problem in radio, but will digital streaming evolve past it?

Spotify lets users create radio stations based on artists and songs. It looks like breeding ground for promotion, but so far, companies deny it.

For discreet promotional relationships, one need not look further in the music industry than payola. The practice of labels paying DJs to play their music ran rampant in the 50s, with one Chicago DJ paid $22,000 to play a record. A Congressional investigation led to USC 317, which prohibits radio stations from playing for pay.

For years after, radio stations and labels tried to work around the law using independent promoters and intermediaries. But in the mid-2000s, New York state attorney general Eliot Spitzer sued several labels for continuing the practice using this loophole. Universal Music Group, Sony, and Water all settled out of court for millions of dollars, while EMI is still under investigation.

Four major radio companies including Clear Channel also settled over investigations from the FCC over the loophole in 2007, for a total $12.5 million in fines and an agreement to not participate in payola and give a certain number of hours of airtime to independent labels.

While these investigations would seem a fatal blow to the concept of paying money for a platform to play music, the regulations, the investigations, and the original payola law apply strictly to radio stations; that is, music disseminated over airwaves. But what about all of the digital music services that have cropped up in the last few years, and even the digital radio stations that they let users generate? Though they've started to earn suspicion, and certainly have the right tools, promotion is happening, but not like we might expect.

Promoting in a new age

Unlike radio, services like Spotify or Rdio have compound income streams from both ads run in between songs and subscription fees paid by users. Spotify has even specified how it pays out this income among labels and rights holders and what it keeps for itself.

With the amount of data and control at Spotify's fingertips it seems possible the service could be tweaking the playback behavior of, say, users' individual shuffled playlists, or bubbling up more popular music on a user-created radio station, effectively emulating a modern version of payola. Yet an internal source confirmed to Ars that Spotify doesn't, to their knowledge, do anything like this.

Steve Savoca, head of Spotify's label relations, also spoke to Ars on the record about the company's various promotional practices. Spotify has several "ad products" that music labels can buy, Savoca said; for instance, placement on the Discover page or advertising of its artists' playlists are something Spotify can offer. But in terms of actually getting music onto, say, a radio station, or pushing it into a higher frequency on a shuffled playlist, Savoca says it does not happen. "There is no exchange of money to win the opportunity to promote on a service," Savoca said.

When asked if Spotify could target promotions for a new album based on a user's liking of one artist, Savoca said that Spotify doesn't have that kind of granularity. The Discover page does work its advertising magic by relating promoted material to what a user already listens to, but the music itself never gets pushed to a user's radio station, for instance, Savoca said. Spotify will employ plenty of strategies to get music in front of users, all the way up to the point of actually playing it. The algorithm is part science and part human-influenced curation, Savoca says, but never promotion.

This isn't to say that Spotify doesn't offer plenty of avenues for labels to promote their content throughout the service. In fact, more of the service is promotionally "curated" than may be immediately clear. Spotify stated that areas like its Discover page are influenced by relationships with labels. Savoca said Spotify also has a system of organizing and promoting playlists through influential users that can help get music out there. Influential users can include artists, bands, or well-networked consumers. And Spotify knows its promotional efforts are effective, as it takes credit for Kendrick Lamar's "good kid, m.A.A.d. city" reaching number two on the Billboard charts.

Pandora, which runs a much more guided experience than Spotify but also manages its music, rights, and royalties differently, also does not accept money to promote music through increased play. Whether Pandora would use its rotation algorithms to promote music is "not totally off the table," said Eric Bieschke, Pandora's chief scientist. "We would be interested in doing it if it were the best thing for listeners." But Bieschke said that type of promotion would be at odds with the company's ethos. "To me payola feels like a foreign thing, culturally," Bieschke said.

Why not, and what else

With an opportunity to implement both a more effective and less noticeable form of payola, it's surprising that these music services aren't already trying it. It may have something to do with the original use of payola as a way to influence listeners to become fans or even buy music. If someone's already listening to something on Spotify, their motivation to buy the relevant album is more or less zero.

But within the constraints of a streaming service, getting music out there does have its own circle of influence—friends who follow each other on the service see what the other listens to. Rdio even lets users curate reviews of music they like. But as far as moving society's musical taste needle, the likes of Spotify and Rdio may not register where, say, Clear Channel once did: the company topped out at 1,200 stations in the US in the early 2000s, many of them for mainstream-oriented music. Not only are digital music listeners of far more diverse taste, they are not a captive audience the way radio listeners tend to be.

This hasn't stopped the possibility of digital payola from entering indie artists' consciousness as a threat to their mindshare. The Future of Music Coalition, an advocacy organization for independent artists, published a piece in mid-June stating that "Consumers have no way of knowing whether recommendations and curated playlists are based on curatorial choices, or whether big money tips the scales."

FMC points out that there are virtually no laws for disclosure with digital distribution services: "The Communications Act requires that broadcasters must disclose “if matter has been aired in exchange for money, services, or other valuable consideration,” making undisclosed payola illegal on AM/FM radio. But when it comes to online services, regulatory agencies such as the Federal Communications Commission have no jurisdiction. The Coalition also noted that the way digital music can have shades of retail mixed into its streaming business can muddy how payola laws might be applied, if at all.

Despite that it would seem trivially easy to implement the type of good-old-fashioned payola where sponsored music gets played more, companies and internal sources claim they don't do it. Perhaps the skepticism of how streaming is fitting into the music business as a whole is unearned. Maybe there are more effective ways of promoting what the labels want. Or maybe the business just isn't there yet.